Kind of a slow morning; maybe summer is settling in, although you couldn’t tell from Boston’s weather. We probably won’t see the *sixties* this weekend. I’ve added a couple of humorous links – something for the end of the week.

I’m on the road for most of next week, and I have no idea if I’ll even get a chance to look at the ‘Net, much less add to this. We’ll see……

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Andrew Leonard reviewsRuling the Root, a history of the domain name system, and its subversion in the interests of business intellectual property concerns.

Wireddiscusses the problems of the record industry from another perspective. As more information turns up showing that file sharing doesn’t seem to be effecting recording companies that much, the industry seems to be recognizing that the tools that they use to preserve their “digital rights” run the risk of alienating the very customers that they want to reach – sounds like fair use = consumer surplus may have some traction.

Today’s Salon article (the hot link around the legal weblogs today!) got me to read Leibowitz’ Cato Institute policy paper on file sharing, Policing Pirates in the Networked Age. As others who have read both articles note, Leibowitz has some notions about digital rights management that leave people cold (see the Slashdot discussion, for example).

But, it got me thinking. Leibowitz argues that digital rights management software affords the vendor of content a new set of ways to price discriminate – for example, these vendors can sell a base CD, then sell a digital key allowing MP3 ripping, another allowing playing the CD in a portable device, another allowing use in a player hooked up to a cassette recorder, or a radio transmitter, or a CD burner, etc. In the past, all these different uses had to be covered by the single transaction of a CD sale, and those who used the CD for more than the “designed” purpose, got those uses for free.

Of course, this getting something at a price lower than you were willing to pay has always happened – economists refer to it as “consumer surplus” and it’s the area between a downward-sloping supply curve and the horizontal line drawn through the sales price of a good. Leibowitz points out in his paper that digital rights management software is essentially a way for sellers to extract this consumer surplus without having any effect on market efficiency (because it’s just extracting the surplus, the transaction still takes place – the consumer just doesn’t come out as far ahead as he would have otherwise).

Now, in the world of the Cato Institute, giving business new ways to extract consumer surplus is a good thing. But in other spheres, the extraction of this consumer surplus means a net transfer of value from consumers to firms, potentially lowering social welfare – especially in the case of digital distribution, where there are substantial cost reductions in distribution costs to be had. Traditionally, governments worry about the distribution of of social welfare, so of course the Cato Institute is happy seeing market “efficiencies” supplanting another government function.

But, more importantly to this discussion, what if we think of “fair use” as part of the consumer surplus in exchange transcations involving intellectual property? Consider “first sale” or the other elements of practical copyright application. In most (if not all) of these cases, the reason that these practices have been accepted in the courts and/or in the markets is that the transaction costs of enforcing the extraction of this consumer surplus is either onerous or implementable only through the application of restrictive mechanisms inconsistent with our notions of liberty.

If “fair use” is a kind of consumer surplus, shouldn’t we be very careful to ensure that social welfare does not suffer as new technologies are employed to take it away? When the Audio Home Recording Act enshrined fair use in law, taking it out of the common law realm, was this part of the rationale?

Maybe what we are facing is a new kind of challenge to our doctrines of copyright. In the past, new technology always meant a challenge to the value proposition of the holder of intellectual property. Maybe we need to face up to the fact that this set of technologies holds dangers not only for the owners of intellectual property, but also the buyers of it.

What do you think? I grant you, "consumer surplus" is not the sexiest idea, but the fact that it is being reallocated through the application of laws and technologies without consideration of the impacts on social welfare seems like a good starting point.

An interesting article from Salon, following up on a Cato Institute study that should get a lot of people talking (but I somehow missed the first time around), leads off today. And I discover that joelgrus has added me to his IP blogs list – thanks!

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Salon has an interview with Stan Liebowitz, author of a recent Cato Institute study that concluded that the only reason that Napster’s file sharing didn’t effect the recording industry more was the low penetration of CD burners in the user market and general bandwidth constraints. (More distressing, although perfectly consistent with the Cato Institute world-view, is the report’s conclusion that universal DRM merely is a mechanism for near-perfect price discrimination in IP transactions, thereby allowing IP owners to absorb all the consumer surplus in these transactions and, since the price discrimination is so good, with no effect on market efficiency). In this Salon interview, however, Liebowitz frankly admits that now he’s not sure why the recording industry isn’t being effected by file sharing. An interesting read. (A Slashdot discussion just popped up: The Economics of File Sharing

Following up on yesterday’s announcement of pending plans to offer (possibly) unfettered music downloads, LawMeme has put up a discussion with more links that expresses serious doubts about just how easy it will be to make copies. Of course, as Liebowitz insists in the article listed above, fair use isn’t supposed to be free, just possible – so why should anyone complain??!

Schizophrenia rules the day! On one hand, record companies are reportedly moving toward cheap, unfettered downloads, while on the other hand cable companies are talking about blocking P2P – thank goodness I chose DSL!! Update: I can’t believe I left the office without letting everyone know there’s a new sheriff in town to take care of all those broadcasting DRM problems.!

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Slashdot reports, and discusses, plans by cable companies to block P2P. Sounds like a great way to cut their throats and make DSL providers happy.

I guess it had to happen sometime. Following Donna Wentworth’s challenge, my rather shallow response, Ernest Miller’s response and now George Scriban’s, I’m going to try to continue the discussion below. So, no new links, but rather my first stab at trying sound as intelligent as Donna seems to think I am <G>

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So, Donna’s original challenge was essentially, how to construct a compelling defense of fair use that will reach the public, rather than those of us who have been following this topic – i.e., how to avoid preaching to the choir?

After rereading Lawrence Lessig’s interview in Reason, I found one possible rhetorical point – Prof. Lessig points out that one construction of copyright is a right to exercise a “monopoly” and extract monopoly rents; if so, then this is distinguishable from conventional property, if only because monopoly is generally considered a bad thing that is remedied by governments to promote social welfare.

Another point is to consider that a truly rivalrous application of copyright (say, coming up with a great song, but never releasing it/playing it/writing it down) immediately renders the intellectual property per se worthless – at least from an economic perspective. In fact, value is only achieved through the application of other effort – public performance, display, etc. (This is what Bowie was essentially saying in the article that I suggested to Donna the last time around.)

Moreover, as Ernest Miller states, the notion of an exclusive right to make a copy as an element of copyright is only a century old, and is thoroughly entangled in exceptions to cope with the issues that he describes – much of the modern methods for extracting rent from copyright is wrapped up in the making and distribution of copies, and it is the kind of copying that probably distinguishes fair use from other kinds of copying.

In Digital Copyright, Jessica Littman tries to distinguish commercial from noncommercial copying (see this and this if you haven’t read the book) as the basis for cleaning things up, but I think that’s too broad a brush. In particular, it opens the owner of certain copyrighted goods to altruistic sabotage through noncommercial giveaways. However, I think that this is the place where the debate may end up.

The problem, then, is what is a copy? The case law here is pretty much what has been used to introduce the notions of copyright to law students in the first place – player piano rolls are not copies of sheet music, therefore they are noninfringing, etc. And, frankly, many point to the CONTU white paper (see pages 65 et seq.) as the point where the construction of “copy” started to lose all reasonableness in the digital realm.

OK – so that was machines; but what about people? Was Mozart’s ability to play back what he heard once infringing? Playing it back in a satirical way? In a better way (a la the movie Amadeus)? Or in a way to illustrate the defects in the song? What about the lesser ability of being able to remember the song, but not being able to output it, or only to hum a few bars? There have been several humorous pokes at the problem (see this [BBSpot], this [O’Reilly Net], this [Modern Humorist], this [CNet] and, perhaps more horror than humor, The Right to Read and this variant), but the scary part is that the humor cuts pretty close to the bone when we look at the implications of what is being proposed.

In fact, it may be that reductio ad absurdum (sp?) may be the effective strategy; particularly if it can be backed up by a credibly applicable technology that shows it up. We have been told that DeCSS is not a legal tool, and the general public seems to have bought it. (despite Touretsky’s DeCSS Gallery – do you own a t-shirt?) But what about a magic marker? A Reuters news article? If these are formally in violation of the law, isn’t there something wrong with that law? That was clearly Prof. Felten’s objective when he withdrew his paper; unfortunately, the RIAA has attorneys who were smart enough to back down. So far, it appears that the cases that are being taken up are, like Donna points out, painting the wrong picture. So, what can be mooted up to make the point – in the same vein as the Vietnam-era argument that, by discussing plans to kill a bald eagle meant that, as a Federal felon (albeit unconvicted) you could not enter the Armed Services.

Can we define a credible act, accessible to the everyday person, that seems to be fair use, but violates the DMCA or copyright in general? For example, Litman regularly cites the fact that many small restauranteurs regularly challenged the licensing fees collected by ASCAP/BMI for radios played in a dining room, because they just couldn’t believe that doing so meant that monies were owed. If we can find one, that may be the most effective way to illustrate the problem. Now, the hard part………

I wasn’t really sure I’d post anything today, but David Bowie is interviewed in the New York Times today, and it picks up a thread cited in my last posting that I found in New York Magazine. Worth reading. In fact, most of what I have here today is about the changes in the music industry, and how artists are responding (and, more distressingly, how the record companies are NOT).

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Is David Bowie’s business acumen as sharp as the clarity of his artistic vision? Read this New York Times article (sample quote: "I’m fully confident that copyright, for instance, will no longer exist in 10 years, and authorship and intellectual property is in for such a bashing"; and note the parallels with this earlier cite from New York Magazine. Slashdot has a commentary on the NYT article. And, I finally find that there has been a Slashdot discussion of the Wolff article too: The Music Biz Is the New Book Industry

Sorry! MIT graduation festivities started yesterday, and coincided with my descent into the throes of a summer cold! I decided to stick with adding links, figuring that checking out the newest links would be pretty easy. Now that I’m a lull for the moment, I thought I might try to catch up.

Interestingly enough, the big news today has largely been the same as yesterday’s – so I’ve really been refining the earlier links. Three main topics – Movie88/Film88, the ReplayTV users’ suit, and NetFlix – with some music biz on the side.

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The EFF has joined a group of ReplayTV users, filing a suit that, it is hoped, will address the question raised by Kellner of AOL’s screed (click here to find related articles) some while ago – is skipping commercials in a recording of broadcast television theft/copyright infringement? The best discussion I have seen of this is still the FindLaw piece, but lots more have been posted recently

Brad King has an insightful essay on Wired discussing a key problem the record industry faces -reconciling DRM with the ethos of music; his article certainly describes me and my attitudes to a “T.” An article that makes some strong predictions about the future of the music industry is in New York Magazine, and it’s getting a lot of attention on the Internet. I’m sure there’ll be a Slashdot discussion that I’ll need to add

NetFlix is a recent IPO success in the .com world – there are two articles, one from the NYTimes and one from Salon, that discuss their position, their business and take a look at the implications for movie distribution.

Wired.com compares and contrasts the relationship between the content providers and the lead companies in the DVR business – Sonicblue and TiVo. One is cooperating and one is fighting – will the difference in attitude lead to a competitive advantage>

A big story on the cover of USA Today on the music industry’s woes. They have a theory on the existence of music piracy. A lot of writing on the subject.

Man! A ton of things turned up on my www searchings this morning. I will try to get them up over the course of the day, but you may also just want to check my New Links at the ESD.10 Links page.

And, to go completely off-topic, this Onion article is too funny to be missed!

Update: Clearly, the press was expecting the Broadcast Protection Discussion Group to have a great, consensus-building report out today. Instead, it looks like there’s nothing but fighting ahead. This was the source of most of the new stuff, although one particularly notable addition is the new EFF weblog (paralleling the one they have been using for the BPDG) on DMCA abuse.

Update 2: Slashdot links for many of the articles added. And Movie88 has come back to life – in Iran!

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USA Today talks about the state of the music industry today – problematic, for the most part:

No wonder pop fans are singing the blues. Radio sounds like a broken record. CD prices are heading off the charts. Labels are out of tune with the digital age. New acts fail to strike a chord with listeners. It’s time to face the music. The $14 billion recording industry, struggling through its first sales slump in a decade, faces challenges on several fronts, not the least of which is a tarnished image in the eyes and ears of fans who feel ripped off by greedy, tone-deaf bean counters. In 2001, album sales dropped 2.8% compared with 2000, the first dip since SoundScan began tracking sales in 1991.

A couple of articles on the Broadcast Protection Discussion group.

ZDNet offers up a hopeful article on the policy deliberations of this group